After talking to hundreds of fitness business owners, we realized that client retention is a widely misunderstood concept and a highly underrated performance metric.
Most business owners think that retention is merely the number of clients at the beginning of the month minus the number of customers leaving in that particular month.
But this is not at all correct!
The problem with measuring retention in this way is you are not differentiating between someone who joined in January and stayed till June and someone who joined in May and stayed till June.
And what does this result in? You measure your retention much higher than it actually is.
Why is retention important?
To begin with, why should you be even bothered about your retention? Here's why:
- It costs 5 times as much to acquire a new client than to keep one.
- It’s much easier to convince a current member to stay longer than persuade a potential member to join.
- Loyal long-term members generally see value in your business, so they’re 60% likely to buy additional products and services from you increasing your profits by up to 95%.
Apart from measuring retention incorrectly, another mistake that most business owners make is believing that the retention rate is a measure of how well your business is doing.
It is a way more powerful metric than that.
Your retention rate lets you draw insights that will help you craft intelligent retention strategies resulting in the growth of your business.
Let us understand how!
How to read the retention rate of your studio?
Your studio management software should provide granular analytics of your retention in the form of a report which looks something like this.
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Understanding reports
Although the chart looks daunting, it is very simple to read.
Let’s say you are looking at the last one year’s data.
The X-axis will tell you the month in which your client first booked a class at your studio.
The Y-axis will tell you how many of those clients stayed with you month over month.
For example: If 154 new clients booked a class in January, January becomes your Month 0, and 100% of them were with you. Coming to Month 1 which is the next month - February 71% of 154 stayed with you. Similarly, 65% of 154 stayed with you in March and so on.
Now, let’s try to read the report for June. According to the chart, 877 customers signed up in June of which only 39% of them stayed in July and 28% of 877 continued in August and so on.
Drawing insights
Why do you even need this super complex information?
Here is why.
Your retention rate will play a vital role in understanding your business.
Taking the example of this report, the following insights can be drawn:
- The clients joining in January have a higher retention rate as compared to other months. The reason for this could be people taking new year's resolutions to be fitter.
- The first quarter sees a higher Month 1 retention as compared to other months.
- The number of people signing up for your fitness studio is higher in the first half of the year as compared to the second half. This could be due to people preparing their bodies for summer.
- May onwards the maximum drop is happening after the first month itself post which retention is almost constant.
How are these insights helpful?
You can take strategic steps using these insights to increase the retention rate which in turn will help you grow your business. These steps can look like this:
- You can try bundling and upselling to clients visiting in January to increase your revenue from relatively more loyal customers.
- You can try selling discounted annual plans to the clients visiting from January-April since they want to become fit but are losing motivation after 2-3 months. You can also try collecting routine feedback to understand the reason for them leaving.
- For clients visiting in the balance of the year, try selling 3-month memberships or discounted bundled credits for them to keep coming back even after one month has ended.
These are some basic actions that you can take looking at this report.
To enable this, make sure that your software gives you granular reports giving you deep insights that will make you a more intelligent entrepreneur.
If it doesn’t, then it is time to re-evaluate your current software and move to one that gives you granular analytics of your retention. One that is not just management software but a partner in your growth.
Looking for a solution?
Your search ends here.
Bookee will provide you with the Knowledge & Intent, Software, and Support along with detailed analytics for you to launch, run and grow your fitness business.
With Bookee, you will get:
- An extremely simple software that will enable management of your operations, beautiful websites & apps, highly effective marketing automations, reports & analytics and a lot more.
- The knowledge for fitness entrepreneurs like you to launch, run and grow your business.
- The support that will walk with you through your journey to success.
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